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UPDATE - DekelOil raises £1.5mln to fast track new crushing plant

Published: 22:11 24 Oct 2014 AEDT

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DekelOil (LON:DKL) has raised £1.5mln through a placing to fund a new kernel crushing plant at its operations in the Ivory Coast.

It will mean the firm can get further value from the kernels from its already operating 60t/hr crude palm oil (CPO) mill.

The new plant will cost £1.1mln to install and has 'highly attractive' payback credentials.

Operations will begin in the fourth quarter of 2015, allowing the firm to sell both palm oil and animal feed to the local market.

Discussions are already underway to secure local offtake agreements, the company said, and the tendering process ongoing for the crushing plant.

Lincoln Moore, Dekel's executive director, said the new money would allow it to fast track construction of the new plant, which in turn would allow it to satisfy strong local demand for palm kernel oil and animal feed.

"In a short space of time, we have transformed DekelOil into a revenue generative vertically integrated palm oil business.

"As well as one of West Africa’s largest CPO mills, our operations at Ayanouan include long term agreements covering 27,000 hectares of mature plantations, 2,000 hectares of company owned planted estates, a state of the art nursery, and an expanding logistics network.

"Combined, Ayanouan provides us with a platform from which we can capitalise on a number of value enhancing opportunities, such as the kernel crushing plant, as we focus on building DekelOil into a leading West African palm oil company.”

Broker N+1 Singer said: "The key attraction is that the kernel seeds that were previously sold at c€180/tonne can now be crushed/processed for higher value palm oil with the residual used for kernel cake/animal feed. 

"This implies an average price of c€400-450/tonne for the seeds once the crusher is operational."

N+ 1 has a fair value of 2.26p on the stock compared to a current share  price of 1.35p.

Analyst Andy Brown said: "The growing global demand for palm oil makes West Africa an exciting investment opportunity. 

"The climate is good and the region does not have the land issues that are now constraining many of the Asian countries. 

"DekelOil has an established presence in Côte d'Ivoire and its existing facilities are producing and already generating positive EBITDA. The planned investment in the kernel crusher enhances profit potential further. Many of the large global producers are taking a more active position in the region which underpins our conservative valuation on the stock."

The fund-raise saw the company place 87.2mln shares and issue over 35.7mln subscription shares at 1.25 pence each - around a 10% discount to last night's closing price of 1.40p.

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